Government Cuts the Number of Luxury Goods Subject to VAT and STLG
Friday, 06 November 2020
The government slashes the number of Taxable Goods (BKP) other than motorized vehicles which included in the luxury goods category and are subject to Value Added Tax (VAT) and Sales Tax on Luxury Goods (STLG), through Government Regulation (PP) number 61 of 2020.
This provision replaces the previous regulation, namely PP 145/2000 as amended by PP 12/2006.
With the new regulation, the number of luxury goods other than motorized vehicles that are subject to VAT and SLTG is only seven groups of goods, from previously 41 groups of goods. Thus, 35 groups of goods were excluded from the luxury goods list or about 85% of the previous amount.
Several groups of goods including luxury goods that are subject to VAT and STLG in the latest regulations include:
- Luxury residences such as luxury homes, apartments, condominiums, townhouses and the like (20% rate)
- Hot air balloon or aircraft without propulsion (40% rate)
- Arm cartridges except for state purposes (40% rate)
- Aircraft other than those for state purposes or commercial air transportation needs (50% rate)
- Firearms, except for state purposes (50% rate)
- Cruise ships, excursion boats and similar vessels (75% rate)
- Yachts except for state purpose and tourism transportation (75% rate)
Read: When Tax Issue Triggers Controversy over Bicycle Regulation Discourse
Apart from slashing the number of luxury goods, the government has also changed the tariff layer scheme, by eliminating 10% and 30% VAT and STLG rates. In the previous regulation, there were six tariff layers in effect, namely 10%, 20%, 30%, 40%, 50%, and 75%.
Change in Purchasing Power
According to the government, the cut aims to balance the tax burden between low-income and high-income people.
In addition, the government also sees that there are several groups of goods that are no longer considered luxurious due to the increase in people's purchasing power, so they must be removed from the list of goods subject to VAT and STLG.
Some examples of items that are no longer considered luxurious include beauty products, household appliances, children's toys to photographic and cinematographic devices.
Another reason for this change of rule is to boost the tourism industry, by excluding some of the industry-related goods groups from the list of luxury goods. One of them is to confirm that yachts used for tourism purposes are not subject to VAT and STLG.
Luxury goods subject to VAT and SLTG rates of 10%:
New Regulation | Old Regulation |
Not Regulated |
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Luxury goods subject to VAT and STLG rates of 20%:
New Regulation | Old Regulation |
1. Groups of luxury residences ( luxury homes, apartments, condominiums, townhouses and the like) |
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Luxury goods subject to VAT and STLG rates of 30%
New Regulation | Old Regulation |
Not Regulated |
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Luxury goods subject to VAT and STLG rates of 40%:
New Regulation | Old Regulation |
|
|
Luxury goods subject to VAT and STLG rates of 50%:
New Regulation | Old Regulation |
|
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Luxury goods subject to VAT and STLG rates of 75%:
New Regulation | Old Regulation |
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